The first rule to investing is ‘Don’t lose money’. The second rule to investing is ‘Don’t forget rule no. 1’! It is essential to stick to these rules when it comes to investing, in order to avoid the possibility of capital erosion.
1. Assess the entry barriers created by a company
Entry barrier should be preferably intellectual in character
Remember, a stock is nothing but a stake in the company’s business. So, observe the company’s business and the entry barriers created by it. The entry barrier should be more ‘intellectual’ in character rather than ‘physical’. This is because while it is next to impossible to compete with a strong brand (an intellectual barrier), competitive advantage associated with a piece of land (a physical barrier) disappears when a competitor acquires one as well.
Strong brands such as ‘Thums-Up’, ‘Parle-G’, etc. have enabled their companies to retain the top spot. However, at times, there could be exceptions. For instance, the entry barrier associated with TISCO would be its large base of iron ore and coal, which allows it to lower its raw material cost drastically vis-à-vis its competitors for long time to come.
Entry barrier should be long-lasting
An entry barrier should not only be strong, but also long lasting. Such companies will keep making money because their entry barriers keep working for them. For instance, Britannia may not be the best managed company but its strong brand continuously earns money for it.
Buy into such companies at the earliest
As an investor, buy into such businesses ahead of the crowd. If an entry barrier has been established very recently, it may not yet be exploited by the business. Accordingly, the market would not have valued it in the company’s share price.
For instance, when Financial Technologies (promoters of MCX) got its commodity exchange license and launched it, the popular opinion held was that it would be unable to execute the business well. But, today, it has emerged as a premier commodity exchange. Investing in such companies before the market sees their potential delivers best appreciation.
“Though difficult to practice, think ahead of the crowd”
2. Management should be competent and passionate
Choose companies that are led by a team and are competent and passionate. Both these attributes are equally important. Competence or passion alone will not work. An individual with a local degree combined with passion would have greater growth prospects than one who has a Harvard degree but no passion. A company like Pantaloon Retail is a shining example of how passion can create wealth.
“The definition of a great company is one that will remain great for many years”
3. Management should have integrity
Integrity is the most crucial quality that a company’s management must have. Such companies not only run their businesses in an honest manner, but, are honest to all their stakeholders, whether they are employees, the government or the shareholders.
If honesty is part of a company’s DNA, it will be fair to its smallest stakeholders – the minority retail shareholders. Companies such as Tata and Infosys have this quality, which has added to their growth and market attractiveness immensely.
“Without management integrity, no margin of safety can be high enough”
The above-mentioned three characteristics (long lasting intellectual entry barrier, competent and passionate management and integrity) must all be simultaneously present in a company that you choose to invest in.
4. Buy low
The price that you pay for a stock determines your rate of return. So, it is essential that you get your purchase price right. While some companies come out on top with respect to all the first three parameters, the returns falter when it comes to the purchase price.
For instance, HLL comes on top with respect to all the first three parameters but has not delivered as much as far as its stock goes. Its stock delivered a CAGR of approximately just 3 per cent over the last 5 years, when the market delivered a CAGR of approximately 44 per cent over the same period.
The quote - “In the bible it is said that love takes care of a lot of sins. In investments, purchase price takes care of a lot of mistakes” – is very apt. You can make mistakes on assessing the first three parameters, since they are subjective in nature, but getting the right purchase price covers up for all your mistakes. Hence, estimate the expected value / intrinsic value of the company and keep an adequate margin of safety in the purchase price.
“It is much more important to buy cheap than to sell dear”
5. Have patience
When you buy a house you don’t expect it to appreciate overnight. You look at its appreciation over a long period. The same goes with equity. After having bought a company that conforms to all the above four criteria, you need to have patience. Investing in equities is often driven by two emotions – greed and fear. And patience is the mantra that helps overcome these emotions. Patience makes the difference between investing and speculation. It’s like a fertiliser to the investment process.
“In reality, patience is crucial, but it is a rare commodity”
End note
Investing is laying out today’s money for more in the future. Its about performance of the underlying assets. Success in investing is the outcome of a disciplined approach.
Happy Investing !
JGS Investments is a home of expert stockmarket analysts, and premier source for technical analysts research and information on Indian Stock Markets.Just join us at Yahoo Messenger sheth_jg@yahoo.com OR Email at sheth_jg@yahoo.com
Thursday, December 20, 2007
IFCI FOR FREE FALL
OUR BTST- BALRAMPUR CHINI
FII Gross purchases Rs 3446 Cr, Gross sales Rs 5896 Cr, Net Sellers Rs 2449 Cr.
MF Gross Purchases Rs 895 Cr, Gross Sales Rs 514 Cr, Net Buyerss Rs 381 Cr.
OUR PICKS - RELCAP,PENINSULA LAND,ANUH PHARMA,DCB
SELL N SELL IFCI TILL 75-80 LEVELS ON OPENING
Today, Nifty has support at 5,672 and resistance at 5,847 and BSE Sensex has support at 18,872 and resistance at 19,384.
The market may edge higher amid steady-to-firm Asian markets. However, a major upmove is likely as traders are unlikely to build large positions ahead of a long weekend. The market remains closed on Friday, 21 December 2007 on account of Bakri Id and also on Tuesday, 25 December 2007 on account of Christmas.Traders are likely to start building positions towards the end of the month based on expectations of Q3 December 2007 results due next month.
As per provisional data, FIIs were net sellers of shares to the tune of Rs 1454.06 crore on Wednesday, 19 December 2007. Domestic funds bought shares worth a net Rs 350.60 crore on that day.
Stocks in News:
IFCI stake sale has been called off due to differences with Sterlite-Morgan Stanley consortium over management control.
Kingfisher and Deccan board approves merger.
Glenmark receives domestic patent for its asthma molecule, Oglemilast.
BHEL’s bid to build Rs84bn electricity-generation factory gets rejected.
Reliance Industries (RIL) is in talks with Tata Chemicals to sell KG basin gas.
Tata Power eyes shipping and logistics business and plans to raise Rs40bn from domestic and international market.
SAIL signs a pact with Rail Vikas for transportation of 5 lakh tons of imported coking coal per year.
Vale, world’s largest iron ore pellets manufacturer, is in talks with Tata Steel to set up a steel slab plant in Brazil.
Reliance Retail to enter food trading business as a part of major re-structuring of its food and grocery initiative.
Dabur India is planning acquisitions of an FMCG company in foods or personal care segment.
Hero Honda forays into used two-wheeler trading business under the ‘Hero Honda SURE!’ brand.
Union Bank is planning to enter mutual fund business and venture capital business.
Welspun India buys 76% stake in Portugal-based company for Rs600mn.
MRF plans to spend Rs5bn towards setting up a greenfield two-wheeler and four-wheeler tyre facility in TN.
Rolta India plans to enter real estate business through a group company, Rolta Infrastructure.
JK Tyres to hike tyre prices in next quarter.
EMCO promoters keen to raise stake in the company to 51%.
The telecom spectrum panel recommends the government to consider new allocation options, including auction.
Allahabad High Court asks UP Government to rework the cane state advisory price SAP) fixed by it for purchase of sugarcane.
LOTS OF OTHER INTRADAY,BTST,INVESTMENT CALLS
FOR OUR SUBSCRIBER'S ONLY
FII Gross purchases Rs 3446 Cr, Gross sales Rs 5896 Cr, Net Sellers Rs 2449 Cr.
MF Gross Purchases Rs 895 Cr, Gross Sales Rs 514 Cr, Net Buyerss Rs 381 Cr.
OUR PICKS - RELCAP,PENINSULA LAND,ANUH PHARMA,DCB
SELL N SELL IFCI TILL 75-80 LEVELS ON OPENING
Today, Nifty has support at 5,672 and resistance at 5,847 and BSE Sensex has support at 18,872 and resistance at 19,384.
The market may edge higher amid steady-to-firm Asian markets. However, a major upmove is likely as traders are unlikely to build large positions ahead of a long weekend. The market remains closed on Friday, 21 December 2007 on account of Bakri Id and also on Tuesday, 25 December 2007 on account of Christmas.Traders are likely to start building positions towards the end of the month based on expectations of Q3 December 2007 results due next month.
As per provisional data, FIIs were net sellers of shares to the tune of Rs 1454.06 crore on Wednesday, 19 December 2007. Domestic funds bought shares worth a net Rs 350.60 crore on that day.
Stocks in News:
IFCI stake sale has been called off due to differences with Sterlite-Morgan Stanley consortium over management control.
Kingfisher and Deccan board approves merger.
Glenmark receives domestic patent for its asthma molecule, Oglemilast.
BHEL’s bid to build Rs84bn electricity-generation factory gets rejected.
Reliance Industries (RIL) is in talks with Tata Chemicals to sell KG basin gas.
Tata Power eyes shipping and logistics business and plans to raise Rs40bn from domestic and international market.
SAIL signs a pact with Rail Vikas for transportation of 5 lakh tons of imported coking coal per year.
Vale, world’s largest iron ore pellets manufacturer, is in talks with Tata Steel to set up a steel slab plant in Brazil.
Reliance Retail to enter food trading business as a part of major re-structuring of its food and grocery initiative.
Dabur India is planning acquisitions of an FMCG company in foods or personal care segment.
Hero Honda forays into used two-wheeler trading business under the ‘Hero Honda SURE!’ brand.
Union Bank is planning to enter mutual fund business and venture capital business.
Welspun India buys 76% stake in Portugal-based company for Rs600mn.
MRF plans to spend Rs5bn towards setting up a greenfield two-wheeler and four-wheeler tyre facility in TN.
Rolta India plans to enter real estate business through a group company, Rolta Infrastructure.
JK Tyres to hike tyre prices in next quarter.
EMCO promoters keen to raise stake in the company to 51%.
The telecom spectrum panel recommends the government to consider new allocation options, including auction.
Allahabad High Court asks UP Government to rework the cane state advisory price SAP) fixed by it for purchase of sugarcane.
LOTS OF OTHER INTRADAY,BTST,INVESTMENT CALLS
FOR OUR SUBSCRIBER'S ONLY
Wednesday, December 19, 2007
Relief rally haaaaan
OUR BTST - NIFTY ,BANKNIFTY,PATEL ENG
LOTS OF OTHER INTRADAY,BTST,INVESTMENT CALLS
FOR OUR SUBSCRIBER'S ONLY
FII Gross purchases Rs 4117 Cr, Gross sales Rs 5216 Cr, Net Sellers Rs 1089 Cr.
MF Gross Purchases Rs 701 Cr, Gross Sales Rs 495 Cr, Net Buyerss Rs 207 Cr.
Today, Nifty has support at 5,698 and resistance at 5,837 and BSE Sensex has support at 18,936 and resistance at 19,416
Markets on the back of positive global cues are likely to trade in the positive zone.A business daily reports that RCF is planning to sell the Mumbai land. If turned true the stock is likely witness huge action and likely to propel stocks like Bindal Agro travelling in the same boat. Land bank stories are still active and come 2008 we believe slowly market is likely to lose interest in the land bank buzz. But Realy and Infrastructure are likely to enjoy market favour unless any setbacks in the form of next year's fiscal budget.
HOT PICKS - PATEL ENG,ELDER HEALTHCARE,JB CHEMICALS,NEYVELI LIGNITE,ONGC,ISPAT(all time darling)
Pyramid Retail(Rs.174.55) stock price is likely to continue the upside journey after the buy out by IndiaBulls
Stocks in News:
PowerGrid Corporation plans foray into entertainment business and is in talks with Zee Network for a JV.
Pfizer is short of clinical research staff as it is set to expand the number of trials done in India.
Royal Orchid would make an international foray with plans to @������<���om beach resort over a 30-acre property in Dar-es-Salaam, Tanzania.
JSW Steel looking at buying an ore mine in Latin America.
The hearing for US$400mn claim filed by Flag Telecom against VSNL would be decided by early 2008.
BEML expects to start producing medium speed rail coaches from 2008-09.
BEML expects Rs40bn order book by the end of the current financial year.
Wockhardt is conducting phase-II clinical trials of an anti-infective molecule WCK771
Maruti has offered discounts ranging from Rs18,500 to Rs57,500 across models before January price hike.
Indian Oil Corporation has set aside US$3bn for overseas acquisition.
Jindal Power likely to invest over Rs50bn in adding another 1,320MW to its thermal power project in Chhattisgarh.
Voltas has entered the water treatment business.
The Bombay High Court has approved the demerger of Bajaj Auto into two separate entities.
Rallis India plans foray into newer specialty chemicals segment and will look at areas such as construction chemicals.
GTL Infra to invest $450-600mn over next three years for setting up telecom towers.
Glenmark to acquire multi generic front end US$15mn company in Europe.
REL plans to foray in to Africa, to bid for projects in 3 African countries.
HDFC has sought the approval of NHB to retain stake in HDFC Bank.
Spice Jet, Air Deccan to hike prices by around Rs500-1,000.
PSU banks to go on strike from February if proposed plan on consolidation and mergers is not withdrawn.
Farmers' association wants a removal of ban on wheat and rice futures.
Regulators agree to partially open the ECB window for NBFCs.
States to meet Prime Minister to take up new mineral policy.
The Government to ease norms governing airport construction, to allow new airports to come up within 150km of existing ones.
Maharashtra Government plans to invest in Co-Operative Sugar factories to reduce burden of loans.
LOTS OF OTHER INTRADAY,BTST,INVESTMENT CALLS
FOR OUR SUBSCRIBER'S ONLY
FII Gross purchases Rs 4117 Cr, Gross sales Rs 5216 Cr, Net Sellers Rs 1089 Cr.
MF Gross Purchases Rs 701 Cr, Gross Sales Rs 495 Cr, Net Buyerss Rs 207 Cr.
Today, Nifty has support at 5,698 and resistance at 5,837 and BSE Sensex has support at 18,936 and resistance at 19,416
Markets on the back of positive global cues are likely to trade in the positive zone.A business daily reports that RCF is planning to sell the Mumbai land. If turned true the stock is likely witness huge action and likely to propel stocks like Bindal Agro travelling in the same boat. Land bank stories are still active and come 2008 we believe slowly market is likely to lose interest in the land bank buzz. But Realy and Infrastructure are likely to enjoy market favour unless any setbacks in the form of next year's fiscal budget.
HOT PICKS - PATEL ENG,ELDER HEALTHCARE,JB CHEMICALS,NEYVELI LIGNITE,ONGC,ISPAT(all time darling)
Pyramid Retail(Rs.174.55) stock price is likely to continue the upside journey after the buy out by IndiaBulls
Stocks in News:
PowerGrid Corporation plans foray into entertainment business and is in talks with Zee Network for a JV.
Pfizer is short of clinical research staff as it is set to expand the number of trials done in India.
Royal Orchid would make an international foray with plans to @������<���om beach resort over a 30-acre property in Dar-es-Salaam, Tanzania.
JSW Steel looking at buying an ore mine in Latin America.
The hearing for US$400mn claim filed by Flag Telecom against VSNL would be decided by early 2008.
BEML expects to start producing medium speed rail coaches from 2008-09.
BEML expects Rs40bn order book by the end of the current financial year.
Wockhardt is conducting phase-II clinical trials of an anti-infective molecule WCK771
Maruti has offered discounts ranging from Rs18,500 to Rs57,500 across models before January price hike.
Indian Oil Corporation has set aside US$3bn for overseas acquisition.
Jindal Power likely to invest over Rs50bn in adding another 1,320MW to its thermal power project in Chhattisgarh.
Voltas has entered the water treatment business.
The Bombay High Court has approved the demerger of Bajaj Auto into two separate entities.
Rallis India plans foray into newer specialty chemicals segment and will look at areas such as construction chemicals.
GTL Infra to invest $450-600mn over next three years for setting up telecom towers.
Glenmark to acquire multi generic front end US$15mn company in Europe.
REL plans to foray in to Africa, to bid for projects in 3 African countries.
HDFC has sought the approval of NHB to retain stake in HDFC Bank.
Spice Jet, Air Deccan to hike prices by around Rs500-1,000.
PSU banks to go on strike from February if proposed plan on consolidation and mergers is not withdrawn.
Farmers' association wants a removal of ban on wheat and rice futures.
Regulators agree to partially open the ECB window for NBFCs.
States to meet Prime Minister to take up new mineral policy.
The Government to ease norms governing airport construction, to allow new airports to come up within 150km of existing ones.
Maharashtra Government plans to invest in Co-Operative Sugar factories to reduce burden of loans.
Tuesday, December 18, 2007
SUBSCRIBER NOW TO KNOW MORE
The market is expected to open on a weak note today;
traders are advised to assume short positions if Nifty fails to
hold 5750 levels with a stop loss placed at 5820 levels for
downsides of 5700 and 5640 levels. Alternatively, long positions
can be assumed if Nifty finds support at 5640 levels.
The breadth of the market declined to 228:954
suggesting selling pressure prevailed in mid -cap and small-cap
stocks as well. Nifty Futures have witnessed fresh build up of
short positions; Nifty December futures have added 7 lakh
shares in open interest with premium shrinking to 2.80 points
from 24.10 points. On the options front Nifty call options have
witnessed buying while, put options have seen short closure
shuggesting market to remain highly volatile with a downward
bias .
HOT PICKS - GTL INFRA,UNICHEM LAB,BHARATI TELE,KAUSHALYA INFRA
We have a Cautiously Bullish view on Reliance. We recommend a Protective Put strategy:
o Buy One Reliance Dec Fut @ 2790-2800
o Buy One Reliance Dec 2800 PA @ 55 – 60
o BEP: 2860
o Investment: Rs.80,000 (Approx)
o Time Frame: 8-10 Days
traders are advised to assume short positions if Nifty fails to
hold 5750 levels with a stop loss placed at 5820 levels for
downsides of 5700 and 5640 levels. Alternatively, long positions
can be assumed if Nifty finds support at 5640 levels.
The breadth of the market declined to 228:954
suggesting selling pressure prevailed in mid -cap and small-cap
stocks as well. Nifty Futures have witnessed fresh build up of
short positions; Nifty December futures have added 7 lakh
shares in open interest with premium shrinking to 2.80 points
from 24.10 points. On the options front Nifty call options have
witnessed buying while, put options have seen short closure
shuggesting market to remain highly volatile with a downward
bias .
HOT PICKS - GTL INFRA,UNICHEM LAB,BHARATI TELE,KAUSHALYA INFRA
We have a Cautiously Bullish view on Reliance. We recommend a Protective Put strategy:
o Buy One Reliance Dec Fut @ 2790-2800
o Buy One Reliance Dec 2800 PA @ 55 – 60
o BEP: 2860
o Investment: Rs.80,000 (Approx)
o Time Frame: 8-10 Days
Monday, December 17, 2007
Market highly volatile
SUBSCRIBER NOW TO KNOW MORE
FII Gross purchases Rs 6910 Cr, Gross sales Rs 5827 Cr, Net Buyers Rs 1082 Cr.
MF Gross Purchases Rs 1011 Cr, Gross Sales Rs 1192 Cr, Net Sellers Rs 181 Cr.
As per provisional data, FIIs sold shares worth a net Rs 647.10 crore on Friday, 14 December 2007. Domestic institutional investors bought shares worth a net Rs 105.18 crore on that day.
FIIs were net sellers of index futures worth Rs 1359.88 crore on Friday. They were net sellers to the tune of Rs 50.63 crore in index options on that day. FIIs net sold stock futures to the tune of Rs 785.05 crore. They net sold individual stock options to the tune of Rs 10.71 crore.
We expect a softer opening today and another volatile day for the market today. The main attraction will be outside the key indices.Today, Nifty has support at 5,923 and resistance at 6,102 and BSE Sensex has support at 19,680 and resistance at 20,125
Indian midcaps/smallcaps are in no mood to listen to the global music, continue to flare up. Though the run up is broad based the intensity of the run up is definitely a cause of concern. Operator driven stocks are running crazy leaving behind the valuations. Extreme caution is adviced in rumour based stocks and remember history repeats but trying to time the fall is not advisable
Indiabulls Financial will be in action as the Delhi High Court has cleared its demerger plans.
HOT PICKS - INDIA CEM,RDB INDUSTRIES,FORTIS HEALTHCARE,FINOLEX INDUSTRIES
Market: News for the day...
1) Ford set to announce Tata Group as preferred bidder for Jaguar and Land Rover.
2) Tatas eye UK investment bank Close Brothers. Tata among six others suitors.
3) IFCI board meet today, sets conversion price of Rs 107 for FIs, 3 firms Shinsei-PNB, Sterlite-Morgan and Cargill-Texas in fray.
4) Lanco Infra to create holding co for verticals and appoints AT Kearney & E&Y to recommend changes.
5) NSE F&O curb: Alok Industries, Neyveli, TTML, Power Grid, Rajesh Exports, Essar Oil, MRPL, Gitanjali Gems, Nagar Fert, Hotel Leela, Bongaigaon, Adlabs, and GMR Infra. Out of curb: Oswal Chem, Parsvnath, IFCI, Arvind Mills.
6) Phoenix Lamps eyes Surya Roshi's lightining biz.
7) Bajaj Auto Demerger - hearing in Bombay HC concludes; HC to issue order on Monday.
8) Govt may rein revenue sharing agreement to compensate GMR lead consortium for possible loss of revenues due to proposed Greater Noida airport.
9) SBI eyes more banks abroad.
10) Bid for Govt's 36.7% stake in Gujarat Alkalies will be invited post elections.
11) Jindal Drilling: To make pref issue of 1.2 m shares to Citigroup at Rs 1,280/share. Jindal Drilling Issue to Citi represents 10.47% of post-issue cap.
12) Era Infra Engineers open offer at Rs 615/sh.
13) General insurance to get full pricing freedom from Jan 1.
14) India Glycols acquires Shakumbari Sugar and Allied Ind for Rs 47 cr.
15) Power Grid gets finance ministry clearance to procure USD 1600m loan from World Bank and ADB.
16) Coal India hikes prices by 10-15%.
17) Mold-Tek will sell 10% in KPO unit to PE firms.
18) ABG Shipyard to raise USD 200m for expansion.
19) Cummins India eyes USD 2bn auto sourcing deals.
20) Colgate to resume trading and would be part of NSE F&O; lot size 550 shares; options strike prices between Rs 80-680.
21) Manaksia IPO opens today; offer of 1.55 cr shares; price band Rs 140-160.
22) Precision Pipes IPO opens today; offer of shares up to Rs 75 cr; price band Rs 140-150.
23) Porwal Auto Components IPO opens today; offer of 50 lakh shares; price band Rs 68-75.
24) Phoenix Mills board meet on Dec 19 on stock split.
25) Mahindra Holidays & Resorts India files DRHP for IPO of 1.07 cr shares.
26) Allied Digital: Likely to close about USD 5 m domestic co buy in Dec. Sees FY09 revenue at Rs 650 cr; profit at Rs 75 cr.
FII Gross purchases Rs 6910 Cr, Gross sales Rs 5827 Cr, Net Buyers Rs 1082 Cr.
MF Gross Purchases Rs 1011 Cr, Gross Sales Rs 1192 Cr, Net Sellers Rs 181 Cr.
As per provisional data, FIIs sold shares worth a net Rs 647.10 crore on Friday, 14 December 2007. Domestic institutional investors bought shares worth a net Rs 105.18 crore on that day.
FIIs were net sellers of index futures worth Rs 1359.88 crore on Friday. They were net sellers to the tune of Rs 50.63 crore in index options on that day. FIIs net sold stock futures to the tune of Rs 785.05 crore. They net sold individual stock options to the tune of Rs 10.71 crore.
We expect a softer opening today and another volatile day for the market today. The main attraction will be outside the key indices.Today, Nifty has support at 5,923 and resistance at 6,102 and BSE Sensex has support at 19,680 and resistance at 20,125
Indian midcaps/smallcaps are in no mood to listen to the global music, continue to flare up. Though the run up is broad based the intensity of the run up is definitely a cause of concern. Operator driven stocks are running crazy leaving behind the valuations. Extreme caution is adviced in rumour based stocks and remember history repeats but trying to time the fall is not advisable
Indiabulls Financial will be in action as the Delhi High Court has cleared its demerger plans.
HOT PICKS - INDIA CEM,RDB INDUSTRIES,FORTIS HEALTHCARE,FINOLEX INDUSTRIES
Market: News for the day...
1) Ford set to announce Tata Group as preferred bidder for Jaguar and Land Rover.
2) Tatas eye UK investment bank Close Brothers. Tata among six others suitors.
3) IFCI board meet today, sets conversion price of Rs 107 for FIs, 3 firms Shinsei-PNB, Sterlite-Morgan and Cargill-Texas in fray.
4) Lanco Infra to create holding co for verticals and appoints AT Kearney & E&Y to recommend changes.
5) NSE F&O curb: Alok Industries, Neyveli, TTML, Power Grid, Rajesh Exports, Essar Oil, MRPL, Gitanjali Gems, Nagar Fert, Hotel Leela, Bongaigaon, Adlabs, and GMR Infra. Out of curb: Oswal Chem, Parsvnath, IFCI, Arvind Mills.
6) Phoenix Lamps eyes Surya Roshi's lightining biz.
7) Bajaj Auto Demerger - hearing in Bombay HC concludes; HC to issue order on Monday.
8) Govt may rein revenue sharing agreement to compensate GMR lead consortium for possible loss of revenues due to proposed Greater Noida airport.
9) SBI eyes more banks abroad.
10) Bid for Govt's 36.7% stake in Gujarat Alkalies will be invited post elections.
11) Jindal Drilling: To make pref issue of 1.2 m shares to Citigroup at Rs 1,280/share. Jindal Drilling Issue to Citi represents 10.47% of post-issue cap.
12) Era Infra Engineers open offer at Rs 615/sh.
13) General insurance to get full pricing freedom from Jan 1.
14) India Glycols acquires Shakumbari Sugar and Allied Ind for Rs 47 cr.
15) Power Grid gets finance ministry clearance to procure USD 1600m loan from World Bank and ADB.
16) Coal India hikes prices by 10-15%.
17) Mold-Tek will sell 10% in KPO unit to PE firms.
18) ABG Shipyard to raise USD 200m for expansion.
19) Cummins India eyes USD 2bn auto sourcing deals.
20) Colgate to resume trading and would be part of NSE F&O; lot size 550 shares; options strike prices between Rs 80-680.
21) Manaksia IPO opens today; offer of 1.55 cr shares; price band Rs 140-160.
22) Precision Pipes IPO opens today; offer of shares up to Rs 75 cr; price band Rs 140-150.
23) Porwal Auto Components IPO opens today; offer of 50 lakh shares; price band Rs 68-75.
24) Phoenix Mills board meet on Dec 19 on stock split.
25) Mahindra Holidays & Resorts India files DRHP for IPO of 1.07 cr shares.
26) Allied Digital: Likely to close about USD 5 m domestic co buy in Dec. Sees FY09 revenue at Rs 650 cr; profit at Rs 75 cr.
Friday, December 14, 2007
8 reasons why stock market traders lose money
Many people think trading is the simplest way of making money in the stock market. Far from it; I believe it is the easiest way of losing money. There is an old Wall Street adage, that "the easiest way of making a small fortune in the markets is having a large fortune."
I discuss below eight ways of undisciplined trading which lead to losses. Guard against them, or the market will wipe you out. I am qualified to speak on this subject because I was myself an undisciplined trader for a long time and the market hammered me into line and forced me to change my approach.
1. Trading during the first half-hour of the session
The first half-hour of the trading day is driven by emotion, affected by overnight movements in the global markets, and hangover of the previous day's trading. Also, this is the period used by the market to entice novice traders into taking a position which might be contrary to the real trend which emerges only later in the day.
Most experienced traders simply watch the markets for the first half of the day for intraday patterns and any subsequent trading breakouts.
2. Failing to hear the market's message
Personally, I try to hear the message of the markets and then try to confirm it with the charts. During the trading day, I like to watch if the market is able to hold certain levels or not.
I like to go long around the end of the day if supported by patterns, and if the prices are consistently holding on to higher levels. I like to go short if the market is giving up higher levels, unable to sustain them and the patterns support a down move of the market.
This technique is called tape watching and all full-time traders practice it in some shape or form. If the markets are choppy and oscillate within a small range, then the market's message is to keep out.
Hearing the message of the market can be particularly important in times of significant news. The market generally reacts in a fashion contrary to most peoples' expectation. Let us consider two recent Indian events of significance.
One was the Gujarat earthquake that took place on 26 January 2001 and the other the 13 December 2001 terrorist attack on the Indian parliament. Both these events appeared catastrophic at first glance. TV channels suggested that the earthquake would devastate the country's economy because Gujarat has the largest number of investors and their confidence would be shattered, making the stock market plunge.
Tragic as both the events were, the market reacted in a different way to each by the end of the day. In both cases the markets plunged around 170 points when it opened, in both cases it tried to recover and while it managed a full recovery in the case of the Gujarat earthquake, it could not do so in the Parliament attack case.
The market was proven correct on both counts. The Gujarat earthquake actually held the possibility of boosting the economy as reconstruction had to be taken up, and also because most of the big installations, including the Jamnagar Refinery, escaped damage. In the case of the attack on parliament, although traders assessed that terrorist attacks were nothing new in the country but the market did not recover because it could see some kind of military build-up ahead from both India and Pakistan. And markets hate war and uncertainty.
In both these cases what helped the cause of the traders were the charts. If the charts say that the market is acting in a certain way, go ahead and accept it. The market is right all the time. This is probably even truer than the more common wisdom about the customer being the king. If you can accept the market as king, you will end up as a very rich trader, indeed.
Herein lies one reason why people who think they are very educated and smart often get trashed by the market because this market doesn't care who you are and it's certainly not there to help you. So expect no mercy from it; in fact, think of it as something that is there to take away your money, unless you take steps to protect yourself.
3. Ignoring which phase the market is in
It is important to know what phase the market is in -- whether it's in a trending or a trading phase. In a trending phase, you go and buy/sell breakouts, but in a trading phase you buy weakness and sell strength.
Traders who do not understand the mood of the market often end up using the wrong indicators in the wrong market conditions. This is an area where humility comes in. Trading in the market is like blind man walking with the help of a stick.
You need to be extremely flexible in changing positions and in trying to develop a feel for the market. This feel is then backed by the various technical indicators in confirming the phase of the market. Undisciplined traders, driven by their ego, often ignore the phase the market is in.
4. Failing to reduce position size when warranted
Traders should be flexible in reducing their position size whenever the market is not giving clear signals. For example, if you take an average position of 3,000 shares in Nifty futures, you should be ready to reduce it to 1,000 shares.
This can happen either when trading counter trend or when the market is not displaying a strong trend. Your exposure to the market should depend on the market's mood at any given point in the market. You should book partial profits as soon as the trade starts earning two to three times the average risk taken.
5. Failing to treat every trade as just another trade
Undisciplined traders often think that a particular situation is sure to give profits and sometimes take risk several times their normal level. This can lead to a heavy drawdown as such situations often do not work out.
Every trade is just another trade and only normal profits should be expected every time. Supernormal profits are a bonus when they -- rarely! -- occur but should not be expected. The risk should not be increased unless your account equity grows enough to service that risk.
6. Over-eagerness in booking profits
Profits in any trading account are often skewed to only a few trades. Traders should not be over-eager to book profits so long the market is acting right. Most traders tend to book profits too early in order to enjoy the winning feeling, thereby letting go substantial trends even when they have got a good entry into the market.
If at all, profit booking should be done in stages, always keeping some position open to take advantage of the rest of the move. Remember trading should consist of small profits, small losses, and big profits. Big losses are what must be avoided. The purpose of trading should be to get a position substantially into money, and then maintain trailing stop losses to protect profits.
Most trading is breakeven trading. Accounts sizes and income from trading are enhanced only when you make eight to ten times your risk. If you can make this happens once a month or even once in two months, you would be fine. The important point here is to not get shaken by the daily noise of the market and to see the market through to its logical target.
Remember, most money is made not by brilliant entries but by sitting on profitable positions long enough. It's boring to do nothing once a position is taken but the maturity of a trader is known not by the number of trades he makes but the amount of time he sits on profitable trades and hence the quantum of profits that he generates.
7. Trading for emotional highs
Trading is an expensive place to get emotional excitement or to be treated as an adventure sport. Traders need to keep a high degree of emotional balance to trade successfully. If you are stressed because of some unrelated events, there is no need to add trading stress to it. Trading should be avoided in periods of high emotional stress.
8. Failing to realise that trading decisions are not about consensus building
Our training since childhood often hampers the behaviour necessary for successful trading. We are always taught that whenever we take a decision, we should consult a number of people, and then do what the majority thinks is right. The truth of this market is that it never does what the majority thinks it will do.
Trading is a loner's job. Traders should not talk to a lot of people during trading hours. They can talk to experienced traders after market hours but more on methodology than on what the other trader thinks about the market.
If a trader has to ask someone else about his trade then he should not be in it. Traders should constantly try to improve their trading skills and by trading skills I mean not only charting skills but also position sizing and money management skills. Successful traders recognise that money cannot be made equally easily all the time in the market. They back off for a while if the market is too volatile or choppy.
I discuss below eight ways of undisciplined trading which lead to losses. Guard against them, or the market will wipe you out. I am qualified to speak on this subject because I was myself an undisciplined trader for a long time and the market hammered me into line and forced me to change my approach.
1. Trading during the first half-hour of the session
The first half-hour of the trading day is driven by emotion, affected by overnight movements in the global markets, and hangover of the previous day's trading. Also, this is the period used by the market to entice novice traders into taking a position which might be contrary to the real trend which emerges only later in the day.
Most experienced traders simply watch the markets for the first half of the day for intraday patterns and any subsequent trading breakouts.
2. Failing to hear the market's message
Personally, I try to hear the message of the markets and then try to confirm it with the charts. During the trading day, I like to watch if the market is able to hold certain levels or not.
I like to go long around the end of the day if supported by patterns, and if the prices are consistently holding on to higher levels. I like to go short if the market is giving up higher levels, unable to sustain them and the patterns support a down move of the market.
This technique is called tape watching and all full-time traders practice it in some shape or form. If the markets are choppy and oscillate within a small range, then the market's message is to keep out.
Hearing the message of the market can be particularly important in times of significant news. The market generally reacts in a fashion contrary to most peoples' expectation. Let us consider two recent Indian events of significance.
One was the Gujarat earthquake that took place on 26 January 2001 and the other the 13 December 2001 terrorist attack on the Indian parliament. Both these events appeared catastrophic at first glance. TV channels suggested that the earthquake would devastate the country's economy because Gujarat has the largest number of investors and their confidence would be shattered, making the stock market plunge.
Tragic as both the events were, the market reacted in a different way to each by the end of the day. In both cases the markets plunged around 170 points when it opened, in both cases it tried to recover and while it managed a full recovery in the case of the Gujarat earthquake, it could not do so in the Parliament attack case.
The market was proven correct on both counts. The Gujarat earthquake actually held the possibility of boosting the economy as reconstruction had to be taken up, and also because most of the big installations, including the Jamnagar Refinery, escaped damage. In the case of the attack on parliament, although traders assessed that terrorist attacks were nothing new in the country but the market did not recover because it could see some kind of military build-up ahead from both India and Pakistan. And markets hate war and uncertainty.
In both these cases what helped the cause of the traders were the charts. If the charts say that the market is acting in a certain way, go ahead and accept it. The market is right all the time. This is probably even truer than the more common wisdom about the customer being the king. If you can accept the market as king, you will end up as a very rich trader, indeed.
Herein lies one reason why people who think they are very educated and smart often get trashed by the market because this market doesn't care who you are and it's certainly not there to help you. So expect no mercy from it; in fact, think of it as something that is there to take away your money, unless you take steps to protect yourself.
3. Ignoring which phase the market is in
It is important to know what phase the market is in -- whether it's in a trending or a trading phase. In a trending phase, you go and buy/sell breakouts, but in a trading phase you buy weakness and sell strength.
Traders who do not understand the mood of the market often end up using the wrong indicators in the wrong market conditions. This is an area where humility comes in. Trading in the market is like blind man walking with the help of a stick.
You need to be extremely flexible in changing positions and in trying to develop a feel for the market. This feel is then backed by the various technical indicators in confirming the phase of the market. Undisciplined traders, driven by their ego, often ignore the phase the market is in.
4. Failing to reduce position size when warranted
Traders should be flexible in reducing their position size whenever the market is not giving clear signals. For example, if you take an average position of 3,000 shares in Nifty futures, you should be ready to reduce it to 1,000 shares.
This can happen either when trading counter trend or when the market is not displaying a strong trend. Your exposure to the market should depend on the market's mood at any given point in the market. You should book partial profits as soon as the trade starts earning two to three times the average risk taken.
5. Failing to treat every trade as just another trade
Undisciplined traders often think that a particular situation is sure to give profits and sometimes take risk several times their normal level. This can lead to a heavy drawdown as such situations often do not work out.
Every trade is just another trade and only normal profits should be expected every time. Supernormal profits are a bonus when they -- rarely! -- occur but should not be expected. The risk should not be increased unless your account equity grows enough to service that risk.
6. Over-eagerness in booking profits
Profits in any trading account are often skewed to only a few trades. Traders should not be over-eager to book profits so long the market is acting right. Most traders tend to book profits too early in order to enjoy the winning feeling, thereby letting go substantial trends even when they have got a good entry into the market.
If at all, profit booking should be done in stages, always keeping some position open to take advantage of the rest of the move. Remember trading should consist of small profits, small losses, and big profits. Big losses are what must be avoided. The purpose of trading should be to get a position substantially into money, and then maintain trailing stop losses to protect profits.
Most trading is breakeven trading. Accounts sizes and income from trading are enhanced only when you make eight to ten times your risk. If you can make this happens once a month or even once in two months, you would be fine. The important point here is to not get shaken by the daily noise of the market and to see the market through to its logical target.
Remember, most money is made not by brilliant entries but by sitting on profitable positions long enough. It's boring to do nothing once a position is taken but the maturity of a trader is known not by the number of trades he makes but the amount of time he sits on profitable trades and hence the quantum of profits that he generates.
7. Trading for emotional highs
Trading is an expensive place to get emotional excitement or to be treated as an adventure sport. Traders need to keep a high degree of emotional balance to trade successfully. If you are stressed because of some unrelated events, there is no need to add trading stress to it. Trading should be avoided in periods of high emotional stress.
8. Failing to realise that trading decisions are not about consensus building
Our training since childhood often hampers the behaviour necessary for successful trading. We are always taught that whenever we take a decision, we should consult a number of people, and then do what the majority thinks is right. The truth of this market is that it never does what the majority thinks it will do.
Trading is a loner's job. Traders should not talk to a lot of people during trading hours. They can talk to experienced traders after market hours but more on methodology than on what the other trader thinks about the market.
If a trader has to ask someone else about his trade then he should not be in it. Traders should constantly try to improve their trading skills and by trading skills I mean not only charting skills but also position sizing and money management skills. Successful traders recognise that money cannot be made equally easily all the time in the market. They back off for a while if the market is too volatile or choppy.
Market highly volatile
HOT PICKS - ISPAT,MUNDRA PORT, RAMA NEWSPRINT, HIND ORGANICS
Today, Nifty has support at 5,946 and resistance at 6,143 and BSE Sensex has support at 19,829 and resistance at 20,319.
we believe the markets are likely to trade up today. Daily it is a routine to witness new stocks rallying and sitting pretty on circuits. The trend is likely to continue irrespective of the front liners. We always believed in midcaps due to low valutions and rapid growth and never concentrate on large caps except few.The market is expected to stay sideways in absence of major positive trigger in near term. However high volatility may be seen as the market consolidates at higher levels. Overseas cues will also to some extent dictate the near term sentiment. However small and mid-cap stocks may continue their rally on momentum buying, as indicated by strong market breadth in the past few days
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 401.76 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 226.65 crore on Thursday, 13 December 2007.
GMR Share is tipped to touch Rs.280 mark by the year
Tata Tele(Mah) is likely to divest 49% of the stake in its tower business.we have our bet placed likely to double from these levels in the next one year
Abhishek Mills(Rs.71) mentioned couple of times in this section is a multibagger. The stock appear to be eyeing the century level
SUBSCRIBER NOW TO KNOW MORE
Today, Nifty has support at 5,946 and resistance at 6,143 and BSE Sensex has support at 19,829 and resistance at 20,319.
we believe the markets are likely to trade up today. Daily it is a routine to witness new stocks rallying and sitting pretty on circuits. The trend is likely to continue irrespective of the front liners. We always believed in midcaps due to low valutions and rapid growth and never concentrate on large caps except few.The market is expected to stay sideways in absence of major positive trigger in near term. However high volatility may be seen as the market consolidates at higher levels. Overseas cues will also to some extent dictate the near term sentiment. However small and mid-cap stocks may continue their rally on momentum buying, as indicated by strong market breadth in the past few days
As per provisional data, foreign institutional investors (FIIs) sold shares worth a net Rs 401.76 crore, while domestic institutional investors (DIIs) were net buyers of shares worth Rs 226.65 crore on Thursday, 13 December 2007.
GMR Share is tipped to touch Rs.280 mark by the year
Tata Tele(Mah) is likely to divest 49% of the stake in its tower business.we have our bet placed likely to double from these levels in the next one year
Abhishek Mills(Rs.71) mentioned couple of times in this section is a multibagger. The stock appear to be eyeing the century level
SUBSCRIBER NOW TO KNOW MORE
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